After Tax Interest Rate
If my mortgage interest rate and car loan interest rate are the same, I know it is best to use my extra principle payments towards the car loan due to the tax advantage I have on the mortage interest. If there is a slight difference in their interest rates, how would I calculate the interest rate on the mortgage after taking into account my tax advantage? Knowing this would let me pick the next worst debt that I should look to pay off.
Filed Our Taxes
We filed our federal and state taxes yesterday night and they got accepted already. Whew!! What a relief!! I was always afraid that we would forget it and on the morning of 16 April, we would wake up with a shock. It’s not happening this year atleast. Between the federal tax where we would get a refund and the state tax we owe, the net refund would be less than $100. We owed money to the state because of my 2007 withholdings being incorrect. We fixed that this January. So we should be good for 2008 taxes. Since we bought the house only around the end of year 2007, our mortgage interest deductions were not as much as the standard deduction.
2008 would be the first year when both of us are working full-time. A couple of things that we need to remember for 2008 taxes are
1) 401k – 2008 would be the first year when we max out our 401k
2) Mortgage interest deductions
3) Traditional IRA contribution
4) Track our medical expenses more closely since we will mostly be itemizing our deductions
Bye Bye Year 2007.
Opening a Traditional IRA
We did our taxes this weekend. We will be receiving a federal refund, but we owe money to the state. If we open a traditional IRA, the money owed would be equal to the refund.
First of all, we thought we will not qualify to open IRA. But since I do not have a 401k through my employer, it happens so that I am eligible to fund a traditional IRA. This link here provides how things are different based on whether you or your spouse participates in a retirement plan at work.
So we have decided that we will be opening a traditional IRA for tax year 2007 and would invest the money in an Index fund.
The question we are facing right now is where should we open the IRA. We have relationships with Bank of America. But we are not sure if they are our best option. We will be investing only in no-load NTF mutual funds. According to this comparison at zecco.com, Etrade, TD Ameritrade and Scotttrade have free no load mutual funds. If in the future we want to buy company stocks or etfs, scotttrade provides the lowest fee. They also have physical office locations in our city. So I am leaning towards Scotttrade. Am I overlooking something? Is there a better option?
Being Financially Organized
We are fairly organized when it comes to bills. But I don’t clearly understand what it means to be financially organized.
There are various things we do to stay on track
1) Monthly bill payments – We use a simple excel sheet. It contains a list of bills that we would need to pay on a monthly basis. We look at the sheet twice a month and pay the bills that are due. Most of our bills are online. We update the sheet with the payment date, the amount, confirmation numbers for online payments or check numbers. We calculate the total bill amount paid and make sure our bank balance has money for this plus an allotted monthly spending amount. We have been doing it for almost 3 years now and it has helped us to avoid late payments.
2) Analyze monthly spending – Until recently, we used a tool provided by my online bank account to categorize my spending and compare with an allotted budget. Last week, I went and bought Quicken and we have just started using it. Will update you later on my experience with Quicken.
3) Taxes – For most part, I let my husband do the taxes. But this year, I am going to be involved. This year is crucial because we need to itemize our deductions. We are expecting that we would owe some money to IRS. We need to be more careful about this for the year 2008.
4) Documents – We are very careful about our documents. They are pretty well organized. But we do not file our account statements or receipts. I don’t know the pros and cons of doing it. Any information with regards to this would be helpful. How long to store statements and receipts? Why do we need to store these? Is it okay if we scan and store soft copies? etc.
What are the ways in which you keep your finances organized?
